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Funding Models

Promissory Notes

  • Twenty-three Vermont towns created ECFiber , an LLC nonprofit corporation. ECFiber offers tax-exempt 15-year $2,500 promissory notes that effectively earn 6 percent interest. Fifty thousand people in these towns raised over $900,000 in 2011 to begin an initial buildout covering 26 miles. Several additional fundraising efforts generated hundreds of thousands of dollars to continue the buildout.

Investments (pre-paid)

  • The Utah Telecommunication Open Infrastructure Agency (UTOPIA) is a consortium of 16 Utah cities. Community residents became “investors” in the network by paying upfront for its buildout. UTOPIA CEO Todd Marriott said that “if residents were interested we’d bill them one fee of $3,000/home to connect to the network. We offered financing if they agreed to have a lien put on their houses. Over 31 percent of residents subscribed, with 25 percent of these households paying the $3,000 up front.”

Donations

  • The Steuben County [IN] Community Foundation created a supporting organization called iMAN that raised $2.7 million through mostly local donations to build a dark fiber network infrastructure. iMAN sells the dark fiber to businesses that in turn contract with ISPs to turn on the fiber and sell Internet services. Sixty-five percent of activation fees go to the Foundation whose Board of Directors fund local economic development projects.

Crowd-funding

  • Crowd-funding has been used in the private sector to gather people with a common interest to pool their resources – typically money – to fund an event or service and typically leverage social media (Facebook, etc.) to build the momentum.
  • A technology company in Kansas City – Neighbor.ly – is working with some local governments to use crowd-funding to solicit support (money) from residents to fund and promote services they want.  Kansas City is using this service to expand the number of neighborhoods eligible for the Google fiber network and another effort to raise money (over $400,000) to establish a downtown bicycle-sharing program.

Tax Credit

  • As part of the 2015 New Markets Tax Credit (NMTC) Allocation Application materials, the Community Development Financial Institutions Fund (CDFI) clarified that broadband infrastructure and related activities are eligible for NMTC investments provided that those activities meet the IRS Regulations related to a business qualifying under the NMTC Program.  This guidance is now available to the public in the 2015 NMTC Application Q&A on the CDFI Fund’s website with all of the NMTC Allocation Application materials. The NMTC Program attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years.  With these capital investments, CDEs can make loans and investments to businesses operating in distressed areas. For more information: https://www.cdfifund.gov/programs-training/Programs/new-markets-tax-credit/Pages/default.aspx